The Most Valuable Investing Lesson I Ever Learned

My father was never much of an investor, though he possessed all of the attributes of a potentially successful one. He grew up in a lower-middle-class family in Worcester, Mass., and never had much money to put aside as a young man. Just when he finally started earning a decent salary, he passed away suddenly.

Even though he wasn't an active stock market participant, he did make one, big investment that delivered an incalculable return for him and his family. And that particular investment, as we'll soon learn, illustrates perfectly the incredible power of having a long-term outlook.

"Without frugality none can be rich..."Just like many of the greatest investors, my dad was an extremely frugal man. Born in 1929, his outlook was shaped by the Great Depression, and he was never one to live beyond his means. I honestly don't remember him ever charging much stuff on credit cards. We would only go on vacation when he had the cash in hand to pay for it, and we always knew it was the end of the month when steak and chicken gave way to tuna casserole and hot dogs at suppertime.

When my dad died in 1976, he left behind a generous life-insurance payout, a very manageable mortgage on our house, and no debt. Having no debt to contend with made a huge difference for my family as we tried to deal with the emotional and financial fallout from the loss of my father. To this day, I remain extremely thankful for my dad's prudence and forethought. Warren Buffett once said that the road to wealth is dependent "on two words, industry and frugality." My dad definitely had the latter one down pat.

Coddling the postmanHe was also pretty solid on the former, too. My dad was "old-school" before old-school became fashionable, and like a lot of other folks from his generation, he had a tremendous work ethic. I was always impressed by the fact that he never, ever missed days of work due to illness. In fact, I can only remember one day that he was forced to return home sick -- and it was only because his company told him to go home, so he wouldn't get his colleagues ill.

I also remember him telling me after a big snowstorm when I was a little boy that I'd have to double the size of the path I was shoveling for the postman. Even as a fairly obedient child, I thought, "Does the mailman really need a perfect, three-foot pathway to deliver the mail?" Of course, I kept that question to myself -- children weren't as outspoken in those days.

I can also recall my freezing hands as my dad insisted that I get every last handful of leaves into the Hefty bag on a cold November afternoon. When it came to chores, my dad would have been right at home on Walton's mountain. Like Warren Buffett and Peter Lynch -- to name just two investing luminaries -- he was a tireless worker who would stick with a task until it was completed.

The price of normalThose remarkable qualities allowed my dad to achieve great success with a long-term investment that ultimately transformed the future of his family and perhaps many others as well. This investment wasn't in the stock market, however. It was in a college degree.

When my father graduated from high school, he didn't have enough money to attend college. He did actually apply for several scholarships, but his applications were unsuccessful. After high school, he joined the Air Force, and after that, he got a job with a local newspaper. He dreamed of getting a college degree, however, so he signed up for night school at Northeastern University in Boston.

Despite having four kids, a full-time job, and having to undertake a three-hour round-trip commute several times a week for nine years, my dad graduated No. 1 in his night school class with a bachelor's degree in business administration. When the local paper asked him about his accomplishment, he said, "I went to school the hard way, so hopefully my kids can go to college the normal way." For my dad, a normal college experience meant being a full-time student with an abundance of time for reading, reflection, and debate.

Those must have been difficult years for both my mom and dad. But a mere 21 years after my dad completed his studies, all four of his children had graduated from college as well, earning their degrees the "normal way."

What long-term looks likeThe story of my dad's quest to earn his degree is a great illustration of what having a long-term outlook can accomplish, whether it's in education, investing, or any other pursuit. At its most fundamental level, a long-term approach requires making short-term sacrifices in return for a bigger, long-term payoff. In my father's case, he had to sacrifice precious time with his family in return for the degree and all that came along with that. The college degree eventually resulted in a higher salary for him, as well as a greater appreciation in our family of the importance of education. Both of those things were crucial for his children eventually achieving their own academic success.

In investing, having a long-term outlook might mean increasing your 401(k) contribution from, say, 4% to 8%. That short-term decrease in immediate consumption will be more than offset by having a bigger pot of capital for your retirement. When it comes to stocks, investors are often required to ignore short-term price movements while sticking to a longer-term time horizon. That's one of the keys to successful investing, in my opinion.

Often, pursuing a long-term strategy can mean thinking about something a lot larger than just yourself. For my dad, he was driven to provide greater opportunities for his kids and their kids far into the future. When the online bookseller Amazon.com (NAS: AMZN) shared its long-term focus with shareholders back in 1997, its founder, Jeff Bezos, wrote, "We are working to build something important, something that matters to our customers, something that we can all tell our grandchildren about. Such things aren't meant to be easy." In both cases, short-term sacrifices were necessary in order to achieve huge goals that matter tremendously to multiple stakeholders.

Finally, long-term goals can often result in intangible, but extremely beneficial, outcomes. Google (NAS: GOOG) CEO Larry Page said recently that he was always focused on the long-term, even when critics told him that "search was a solved problem and that there was no money to be made apart from some banner advertising." By sticking with its dream, Google is now a $250 billion company that has a huge impact on our world in a variety of different ways in addition to search.

On a more mundane level, my dad's goal of getting his degree resulted in college educations for his children and eventually grandchildren (though sadly, he never met the latter). And several of his descendants would become teachers who may have inspired even more individuals to pursue higher educations. Warren Buffett famously said that "someone's sitting in the shade today because someone planted a tree a long time ago." I'm extremely grateful for the tree that my dad planted for me, as well as the valuable lesson that came along with it.